LEO: Conflict of Interest - Multiple  LE Op. 1239

 

Conflict of Interest - Multiple Representation - Vicarious

Disqualification: Law Firm Representing Client

Adverse to Another Attorney's Client.

 

May 30, 1989

 

You have advised that Client A is coexecutor of his mother's estate along

with Attorney B who represents Client A exclusively on all matters in

connection with his mother's estate and his interest therein as a

beneficiary. Some time after the foregoing relationship was established,

Client A invested a substantial sum of money in a small business

enterprise ("the Enterprise"). In the process of organizing its affairs,

the Enterprise obtained a lease of a desirable space in which to run its

operations, which lease was in the corporate name and signed by the

organizer as "President." However, delays, such as the incorporation of

the Enterprise, were encountered in getting the Enterprise out of the

planning stages and open for business. During that time, one of the active

investors, C, broke off from the Enterprise and started his own business

of the same nature as the Enterprise. Later, Investor C approached the

same landlord and was successful in getting the landlord to cancel the

existing lease with the Enterprise and then lease the same space to C.

Consequently, the Enterprise was unable to commence business and Client

A's investment was a total loss.

 

Recently, Client A has learned that the law firm of Attorney B

represented Investor C in dealing with the landlord. Apparently, it became

known to B's law firm when Investor C was separating from the Enterprise

that Client A was also an investor. Another attorney of that firm

contacted Attorney B inquiring whether there would be a conflict of

interest for their law firm to simultaneously represent Investor C in his

business endeavor. Attorney B replied that he saw no conflict between

Client A and Investor C in their independent representations and at no

time did he ask or receive Client A's consent for the representation of C.

Neither Attorney B nor his law firm had ever advised Client A with regard

to his investment in the Enterprise.

 

Attorney B continues to be coexecutor with Client A in handling all legal

matters with respect to A's mother's estate, and the law firm of Attorney

B continued to represent C after Client A informed Attorney B of what he

believed to be an "adversarial relationship."

 

You wish to know whether it was ethically proper for Attorney B's law

firm to continue to represent C under the circumstances.

 

The appropriate and controlling rule relative to your inquiry is DR:5-

105(C), which provides that a lawyer may represent multiple clients if it

is obvious that he can adequately represent the interest of each and if

each consents to the representation after full disclosure of the possible

effect of such representation on the exercise of his independent

professional judgment on behalf of each. The Committee previously opined

in LE Op. 706 that representing adverse clients creates the assumption

of adverse effect on the attorney's absolute loyalty to each client.

Therefore, absent consent from both clients, the entire firm is

disqualified from representing either party pursuant to DR:5-105(C) and (

E). Notwithstanding the dissimilarity between the representation of A by

Attorney B in matters associated with the estate of A's mother and the

representation of Investor C by the firm in the lease negotiation between

C and the landlord, the Committee is of the view that it is not obvious

that the best interest of each client can adequately be represented by the

firm or Attorney B when the clients have conflicting interests. Therefore,

there can be no representation, even with the consent of each client.

 

Furthermore, the Committee opines that should, at. any time, the parties

become adversary to each other, the entire firm would be disqualified from

representing either party in the matter in litigation. (See LE Op. 371)

 

Committee Opinion May 30, 1989